US Dollar Loosens grip on Asian debt sector

Generate a 5 Figure income Trading the Forex Market
Veteran trader Reveals How to Generate a 5 Figure income Trading the Forex Market with a Revolutionary and Unique Strategy: "Learn to profit consistently and systematically trading the Forex market with my 3 top PDFT (Price Driven Forex Trading) strategies."

Meanwhile, another headline from the FT told us that the greenback is under attack in other parts of the world: "Dollar loses grip on Asian debt sector."

"The US dollar has lost is status as the pre-eminent currency for fixed-income products such as corporate bonds in Asia, a sector it used to dominate..." said the story. The dollar itself fell to record lows against practically everything - notably, the pound, the euro, and oil. And if the Fed cuts rates again in December - which is given a 90% probability by the futures market - the dollar will fall further...and prices will continue to go up.

But, while the right hand pumps, the left knocks a hole in the bucket. Week after week, more losses are announced. The latest tally by Goldman Sachs estimates total losses at US$400 billion from the subprime debacle, with a total of US$2 trillion of cash and credit sucked out of the financial system. Leverage works in both ways, it turns out. When credit is expanding, a deposit of US$10 million can be levered into a US$100 million gamble. When it is contracting, a US$10 million loss reduces the supply of credit by as much as US$100 million.

The drop in the dollar and the drop in housing prices have already cost Americans trillions in implied wealth. It's money that is going, not coming. Says the Economist Intelligence Unit: "The main risk to the world economy is a deflationary spiral in asset prices."

Which hand will do the most damage? We don't know. Probably both of them will smack us sooner or later.
Tags:

sector    grip    quot    asian    implied    practically    levered    eminent

 Print this page 

del.icio.us Digg Furl Reddit Feed Me Links Technorati Newsvine Socializer Stumble Upon Google Bookmarks Squidoo BlinkBits BlinkList blogmarks Netvouz Ma.gnolia RawSugar Rojo Simpy Spurl Shadows Wists Yahoo! Co.mments! Scuttle!